The peak season began in the fourth quarter, and cement prices continued to rise. China International Capital Corporation conducted a survey of three East China cement companies this week, working with management and sales executives to explore the regional demand for cement and the rising prices in the fourth quarter, believing that the overall price of cement in the fourth quarter will be optimistic.
In addition, China International Capital Corporation also pointed out that the increase in the concentration of large enterprises and the deepening of the collaborative cooperation model will help to increase the sustainability of regional profits in East China. In individual stocks, Anhui Conch Cement A hand H (00914) and Huaxin cement are recommended. It is recommended to pay attention to China Resources cement (01313) and evergreen.
Supply-side control is stronger than in previous years, and inventory in East China is running low.In the winter of previous years, demand in the north weakened and cement moved south to hit the southern market. After the implementation of off-peak production, the flow direction of cement has changed, and the price stability and sustainability in East China have been significantly improved. Superimposed this year, the southern region of the off-season self-regulation limit production, cement inventory has been at a low level, the current clinker storage ratio along the Yangtze River in East China has reached a new low of nearly 5 years.
Pay attention to the marginal impact of atmosphere and energy consumption on supply in East China.At the end of September, Tongling and Xuancheng in Anhui Province issued documents on the prevention and control of air pollution. If the air quality does not meet the provincial control target, Tongling cement enterprises will limit production by 30% in the fourth quarter, and Xuancheng will limit production by more than 50%. In addition, the tightening of mineral property rights caused some production lines in southern Jiangsu to stop production due to the expiration of mining warrants. In addition to the pressure of environmental protection, individual provinces (such as Zhejiang) also face the problem of excessive energy consumption targets. Under the current background of low inventory, ultra-conventional production restriction will have a great impact on the marginal contraction of regional supply.
The overall impact of environmental protection on demand is relatively limited, and there may be a rush to work in the later stage.According to China International Capital Corporation's research area, at present, earthwork in the urban area is mainly limited, key projects are still under construction, and the overall impact on stock demand is relatively limited. In October, due to restrictions on the use of explosives, affecting the supply of limestone and aggregates, superimposing the recent influence of Rain Water, there will be a rush in the later stage of the project under construction.
Be optimistic about the performance of cement prices in the fourth quarter and the first half of next year.The supply and demand pattern of cement has improved significantly this year. The market price of high-grade cement has increased by 24 yuan / ton since mid-late August (an increase of 43.3 yuan / ton over the same period last year), and the price performance in the fourth quarter is expected to exceed expectations. Looking back, the heating season in Shandong, Henan and other places will be limited for four months, and the mill in the passageway city will also be closed, while next year, due to the late Spring Festival, the construction time can be extended to early February. Although enterprises actively prepare clinker before limiting production, the inventory is still not enough to meet the cement demand before the Spring Festival. Industry sales and price performance are expected to improve year-on-year in the first half of next year.
Investment advice:China International Capital Corporation is optimistic about the overall price performance of cement in the peak season in the fourth quarter. At present, inventory in East China is very low. If atmospheric governance or energy consumption problems cause marginal contraction of regional supply, there is more room for price elasticity. In addition, the increasing concentration of large enterprises and the deepening of collaborative cooperation model also help to increase the sustainability of regional profits in East China. Individual stocks, recommend Anhui Conch Cement Astroke H, Huaxin cement, it is recommended to pay attention to China Resources cement and evergreen.
Risk:Demand fell more than expected; prices rose less than expected.
The following is the summary of the survey:
Communication points of A cement Company
As the production limit is approaching, enterprises are actively preparing warehouses. On February 16 of the Spring Festival next year, Shandong and Henan will have a holiday at the end of January or the beginning of February during the peak construction season. Sales in January 2018 are expected to reach 40 million to 5 million tons (2 million tons in the past). November and December factory inventory is not enough, the enterprise requires the storage of clinker for the next 4 months. Last year, Henan appeared. By the middle of October, small enterprises had no clinker.So even if the company is full now, it will not reduce the price.
The impact of environmental protection on demand is relatively limited. At present, earthwork is mainly limited to urban areas, and key projects are non-stop, so the impact on demand is limited. And once a project is finalized, the amount of cement used is certain, nothing more than the extension of the construction period. There are also a considerable number of projects, because of time constraints, once they return to work, they will work overtime to catch up with the amount of work. Downstream demand structure of the company. Key projects + urban infrastructure, which used to account for 15% of the company's sales, fell to 14% in 2015. 17% last year, nearly 23% this year. Real estate accounts for 40%, in addition, county and township demand accounts for ~ 40%. The gross profit per ton of cement clinker is 75 yuan in August, 73 yuan in January and August, and close to 90 yuan in September. It is planned to push up by the end of October, and prices will continue to rise after the kiln stops during the heating season. The average gross profit of the budget for October and December is 97 yuan.
Communication points of B cement Company
The flow direction of cement has changed. This year's better than expected is mainly on the supply side, and the off-peak production has a very significant effect on improving the relationship between supply and demand. Originally worried that the cement from the north would go south in winter, now even at individual stages, the cement from the south will go to the north. Hubei is bordered by Henan, and southern Jiangsu enters Shandong (along the Yangtze River into the north). At present, the level of regional storage location is very low.
Environmental protection and energy consumption: many southern provinces have also introduced local off-peak production policies, and last year there were about nine provinces and cities, including Jiangsu. In addition, in addition to environmental protection, Zhejiang also faces the problem of exceeding the energy consumption target. From the fourth quarter of this year to the first half of next year, we are more optimistic. The inventory level of the industry is not high, and the kiln will be stopped after November 15 in Shandong, Henan Province (possibly in advance). Although the inventory has been prepared in advance, the construction can be done at least in the first ten days of February, and the inventory is not enough to meet the winter demand.
Cancel the effect of compound 32.5R labeling?
32.5 various types of cement, mainly composite 32.5R, other slag, fly ash, pozzolanic 32.5 cement, more is a standard, it is difficult to mass production. Fly ash is not available and has become a resource; there is less and less slag; volcanic ash is not available everywhere, it requires geological conditions, and many small mines are closed. From the point of view of the supply of raw materials, composite 32.5R is not so easy to transfer to other categories. 32.5R admixture can be mixed with 40% jiao 42.5 and only 20% can be mixed with admixture, which has a great impact on clinker in theory. But it is very worried that small factories that do not abide by the law can take advantage of loopholes, because there is no means of testing, change the brand and change the bag to continue to sell.
Is it possible to rush to work in the later stage?
Due to the control of explosives in October, the ore can not be mined in late September in some areas, and the supply of aggregate has an impact. The superposition of Rain Water will definitely have to be done in the next few months. Due to the postponement of the construction period, the workers will have to pay by the day, and the cost will increase a lot. Therefore, it is very difficult for projects under construction to be pushed back artificially, except for a slowdown in new construction.
What is the current sales price performance?
The price fell a little in July (40 yuan from the low point to the high point, and the monthly average price dropped by about 20 yuan / ton). It was flat in August, increased by 2030 yuan / ton in September, and increased by about 20 yuan since the end of September.
Price outlook for the fourth quarter and next year?
15 northern provinces limit production in mid-November, while the south itself is under pressure on environmental protection and energy consumption indicators (Jiangsu reduces the amount of coal used by enterprises every year), and Zhejiang prefectures, districts and counties should reduce energy consumption. The cement line in Fuyang District of Hangzhou will be stopped from the 15th to the end of the month. Prices are expected to rise substantially in the fourth quarter, with a possibility of more than 70%. The fourth quarter of this year lays the foundation for next year, and 2018 is likely to repeat the trend of 2011. And the low point of the price will be much higher than the previous cycle, the company's off-season prices have not gone down much this year, has been in a relatively reasonable platform, not as deep as in previous years.
Will prices be interfered by the government in the fourth quarter?
To strike a balance between social influence and affordability, violent pull-up is unlikely. Need to focus on the balance between regions, the current industry price is actually not high, the average price in East China is only 320,330 yuan / ton, 4Q10 cement price is as high as 600yuan / ton, of course, coal prices are higher at that time. And the cement cost accounts for very little in the downstream construction, and has little impact on the downstream.
Communication points of C cement Company
What is the mentality of small businesses at present? Are there any enterprises hoarding goods ahead of time? Small businesses are consistent with companies in judging industry trends, but they are more cautious. Even if the price is expected to rise, we dare not store a lot of goods. But downstream grinding station, if the price is expected to rise in the later stage, it must be more clinker (raw materials). It continued to rain in the south, but the storage location did not rise, also because of the hoarding of goods at the grinding station.
Will the location of the grinding station drag down the price increase in the later period?
Do not worry this year, because the price of its storage is high, the price of clinker is higher than that of cement, and the price is upside down (East and South China, large enterprises are dominant). The purpose of raising cement alone now is to narrow the price difference between the two. At present, there is a gap of 360,370 per ton of clinker and 340 per ton of cement, with a gap of 20 + yuan. Grinding station is currently struggling to support, basically do not make money.
What is the driving force behind the price rise next year?
It is certain that the price is higher than this year, but I don't know how much higher it is. The key is the balance between regions, integration along the Yangtze River, communication has been done better. From upstream Chongqing, Hunan, Hubei, Jiangxi, Jiangsu, Zhejiang and Shanghai. However, Chongqing in Hubei Province is still not as close as this side of East China, and there is still some room for improvement.It is expected that the starting point of the high price next year will fluctuate slightly, and the average price will be 2030 yuan higher than the same period last year.
Current price and gross profit per ton?
The gross margin of tons in the third quarter is almost 60 + yuan, and the monthly average gross margin of tons in September is 71 yuan / ton. The current time point average price does not include tax 270 yuan / ton (including tax 320 yuan), ton gross profit is close to 100 yuan / ton. The later critical point is mid-November, when there is air pressure after the south clears up.
Current shipments and inventory levels?
Shipments are temporarily affected by rain, if it is fine, cement clinker 1064 million tons / month, of which clinker volume is only about 1.5 million tons, cement 90 million 10 million tons. It has been empty all the time this year, and the rain has risen to 3040%, but more than 10% of it cannot be released.
How to judge the changes in the rural market?
Most companies judge rural demand by bagged sales of 32.5 based on their own sales data. But now many rural markets have begun to mix with merchants, and there is a deviation in statistical interpretation, because the decline in bagged sales does not mean a decline in rural demand. But also with the downstream mixing station to comprehensively judge the rural market. (editor: Jiang Yu)